As of May 4, the MSCI Japan Index holds a year-to-date advantage of 450 basis points over the S&P 500. Investors could be doing even better, though, with more unique approaches to Japan equities. Just look at the WisdomTree Japan Opportunities Fund (OPPJ ). Up 22.5% year-to-date, that ETF is beating the S&P 500 by a margin of better than 4-to-1, while more than doubling the returns of the MSCI Japan Index. OPPJ’s run undoubtedly impresses, particularly when considering that it was accrued in barely more than four months. However, that doesn’t imply that this ETF doesn’t have more gas in its tank.
See more: ETF of the Week: WisdomTree Japan Opportunities Fund
Actually, a case can be made that the Japan ETF has more room to run to the upside, particularly with recent data suggesting foreign investors are again buying Japan stocks.
OPPJ Has Tailwinds
OPPJ appears to be at the right place at the right time, because Japan stocks are more attractively valued than the S&P 500. Alone, that’s reason enough to spark interest among some asset allocators.
“Japanese equities were still attracting strong foreign inflows tied to optimism around AI and technology stocks. For many portfolio managers, this is no longer just a regional trade. It is a decision about where upside looks cleaner from here,” reported News on Japan.
Japan tech stocks, which are OPPJ’s second-largest sector weight at 11.59%, are particularly alluring for foreign investors. Put simply, while U.S. large-cap tech names have momentum, Japan tech names offer momentum and value.
“That combination matters. In the United States, many large technology names already carry rich valuations, so investors have become more selective. In Japan, by contrast, the story feels earlier in the cycle. The companies are well known, the AI theme is real, and the pricing still looks less stretched,” according to News on Japan.
So with OPPJ, it’s possible for investors to have their cake (artificial intelligence exposure) and eat it too (upside potential). Meanwhile, they don’t have to embrace rich valuations for the privilege. These days, that may be enough for many investors.
“The Nikkei 225 is outperforming because it sits at the intersection of two powerful ideas: renewed foreign interest in Japan and a search for tech exposure that does not look as expensive as Wall Street. That is a compelling mix, especially while the S&P 500 faces tougher scrutiny on valuation and market sensitivity to oil and geopolitics,” concluded News on Japan.
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